Comment: Online Fraud - The Card Not Present Conundrum

Shopping online is rapidly becoming part of everyday life with consumers benefiting from the additional convenience that the Internet offers. However, with an increase in online shoppers and a growth in the number of Web outlets to accommodate their needs, the level of fraudulent activity has become more prevalent.

Consumer fears of online fraud have long been the bane of e-commerce, holding back retailers who place an ever-increasing emphasis on Web trading. Despite claims that this is not based on fact, a survey by Experian reveals UK retailers are losing 96m a year to debit and credit card fraud. Over 97 per cent of retailers surveyed have been affected with e-commerce still proving to be a honey pot for credit card fraudsters.

Online retailers will often use a number of tools to predict online fraud, such as credit card verification and authorisation services, but the most frequently overlooked and perhaps most useful tool is the ability to identify where the customer is when they place an order on the Web.

Why Location Matters on the Internet

When a customer walks into your brick and mortar store you can tell a number of things about them right away - age, gender, potential purchasers and whether they are return customers. When it comes to online visitors, it is hard to decipher, what they want, what attracted them to the site, or how likely they are to be fraudulent. It is an anonymous process.

But by identifying just one additional piece of information about a Web visitor - their geographic location - fraud detection from online attack is made possible, as well as compliance with state and national regulations, execution of local search and advertising strategies and even enhanced Web analytics. Think about it - nearly every business decision made is affected by geography - language, currency, shipping, taxes, licenses, government regulations and more. Knowing the geographic location of a Web visitor can provide the same data for an online transaction.

How Can I Identify My Web Visitor's Geographical Location?

The easiest way to do this is by using a technology called IP Geolocation which can tell you where your online customers are coming from and how they connect to the Internet as soon as they hit your Web server - before they actually arrive at your site. IP geolocation suppliers achieve this by identifying key bits of data from the IP address - and there is no need to ask if the visitors to log in or type in their postal code, or store cookies in their browsers. IP Geolocation has already demonstrated business value in three primary areas for online retailers - fraud prevention, marketing and compliance. In the fraud area, a retailer can compare a Web visitor's registration and shipping addresses with his actual location to detect suspicious transactions. The majority of fraudulent orders are placed from international countries. With the same knowledge of where the visitor is, online marketers can execute geographically-based ad campaigns, and even drive traffic into their local brick and mortar store, just as they do in the offline world. They also can customize the content of their Web pages to match the visitor's local language and currency, even promoting specific products for that area. Providers of digital content use geolocation to determine a viewer's geographic eligibility to access their content and even determine their connection speed to serve the appropriate type of video files. Retailers that are subject to geography-based regulations, such as gaming, use the technology to make sure that online bettors are located in legal betting locations.

How IP Geolocation Helps - Fraud Prevention

Fashionable e-retailer, YOOX Group has integrated Quova's IP geolocation data into its' fraud screening and management platform. The YOOX.Com website, a virtual boutique of multi-brand fashion and design, receives in excess of three million visitors every month from around the world and needs to ensure a high degree of online security.

For each order, YOOX reviews a number of key risk factors including IP location in comparison to ship-to and bill-to addresses, the type of Internet connection (fixed or mobile) and whether a customer is accessing the Website through an anonymising proxy, a tool which attempts to make Internet activity untraceable. By using Quova's data, the YOOX Group is able to make a thorough assessment of the risk of online fraud and consequently block orders that do not meet the required level of satisfaction. The online boutique is currently blocking around 20% of all orders, which are then passed through for manual processing and closer analysis by customer services.

Quova has also recently released a whitepaper that specifically focuses on issues relating to e-Retail - the full a document can be downloaded by following the 'more details link below www.quova.com/retailbulletin.